One glance at The Baltic Dry Index's collapse is all that most need to see the painful state of the global shipping industry. However, as gCaptain reports, reality is even worse as the boom in so-called "zombie ships" suggests there is no recovery in sight for the beleaguered containership charter market, which is facing its biggest crisis since the 2008 financial crash.

It looks bad...

And it's not just over-supply... (trade is slowing rapidly)...World trade volume rose by only 0.5% YoY in October and was up 2.4% YoY in the first 10 months of 2015, while world trade value in USdollar terms declined by 12.2% YoY in October and was down 11.8% YoY in the first 10 months of 2015.

Analysts agree there is no recovery in sight for the beleaguered containership charter market, which is facing its biggest crisis since the 2008 financial crash.

However, unlike that bleak period for shipping, which ultimately resulted in a strong recovery for charter rates, this time the fundamentals are quite different.

Overcapacity, stemming from the ordering strategy of carriers has been exacerbated by a growth slowdown in China and ultra-low oil prices. And according to the latest report from Alphaliner, with the possible exception of very small feeders, all containership sectors are struggling badly, with owners obliged to accept sub-economic charter rates and pay for positioning costs just to keep their ships busy.

The revenue earned in charter hire is seen by owners as a “contribution” to vessel overheads, but is often insufficient to cover mortgage payments on the ship.

Thus “zombie ships”, as they have become known in shipbroking circles, are masking the perilous state of container shipping.

Commentators generally point to laid-up tonnage and ship deletions as health barometers of the industry, but in the past year, these have proved to be less than reliable as indicators. Despite chronic overcapacity and weak demand the number of laid-up containerships has only inched up relatively, with Alphaliner’s idle tonnage register at 11 January reflecting a net increase of just six ships in the previous two weeks.

In fact, the total number of idled ships, 337 (1.35m teu), represents only 6.8% of the world’s cellular fleet; a figure that is clearly artificially low given current industry fundamentals.

While some smaller ships were added to the laid-up fleet during the period, Alphaliner notes that several ships of 7,500 teu and above were returned to service ahead of the Chinese New Year holiday, albeit that after the peak pre-CNY weeks these ships are again likely to become surplus to carrier requirements.

The demand for 7,500-9,500 teu ships is “next to zero”, said Alphaliner, adding that there are still 12 vessels of 7,800-8,800 teu seeking employment in Asia.

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As we noted previously, given these trends, the crummy performance of our heavily internationalized revenue-challenged corporate heroes is starting to make sense: it’s tough out there.

And further, as the baltic dry index continues to plumb new record lows, how long until central banks realize that for all their omnipotence and all their attempts to restore growth, inflation and the "wealth effect" they never mastered the only thing worth printing in a globalized world: printing trade?

I should have some data points (anecdotal of course) once Peru gets back to me re Osaka - Callao, Busan - Callao and Shanghai - Callao LTC rates. They are down, but I don't know how much.

Of interest to some is how the strong dollar is hurting small importers in the developing world. Pay with strong dollars, receive in weak local currency. The strong dollar is not giving (us anyway) any lower prices from China, Korea or Japan.

I've glossed over your comments for a few months, but the Peruvian reference in your post above and the obvious clue in the avatar finally made me realize who you are. I'm glad you're here and commenting. Stay safe.

Once upon a time I worked for an electric motor manufacturer. We did an internal study on roller bearings; perhaps not as rigorous or long term as an independent lab test. But the point was that SKF, NSK, and a few Chinese companies like GBC all made solid products. And then there were the rest of them....

I had the opportunity to visit Ningbo, China; which I believe must be the bearing manufacturing capital of the universe, to see some of our supplier's operations first hand. I'm still stunned that there can be that many companies dedicated to making bearings in one place...

If we're unlucky war might solve our problems with an excess of container ships. Think back to WWII and the German U-boat wolfpacks affect on shipping.

Imagine one rogue nation, like North Korea, taking their submarine(s) and attacking shipping in a major shipping lane. They or the Iranians, or the Russians, could do a great deal of damage in a very short period of time...

Related to all this container ship business, who is building massive warehouses all around the southwest to California? These fucking tilt up monstrosities show up from one week to the next it seems. I can't fathom any real economic activity that will ever utilize these things. Makes me think in the future there will be a business in repurposing these grim structures into something else. Maybe roller rinks will make a comeback.

how long until central banks realize that for all their omnipotence and all their attempts to restore growth, inflation and the "wealth effect" they never mastered the only thing worth printing in a globalized world: printing trade?

Todays economy runs on app downloads,unicorn poo and cat videos money is created through a keyboard,shipping is the old 20th century economy model when currencies took into account the value of labour participation value added etc which has been superceeded